Exhibit 4.1
Execution Copy
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SERVICING AGREEMENT
among
SMS STUDENT LOAN TRUST 1999-B
as Issuer,
USA GROUP LOAN SERVICES, INC.
as Servicer,
USA GROUP SECONDARY MARKET SERVICES, INC.
as Seller,
and
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as Eligible Lender Trustee
Dated as of April 19, 1999
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SERVICING AGREEMENT dated as of April 19, 1999, among SMS
STUDENT LOAN TRUST 1999-B, a Delaware trust (the "Issuer"), USA GROUP LOAN
SERVICES, INC., as servicer (the "Servicer"), USA GROUP SECONDARY MARKET
SERVICES, INC., as Seller (the "Seller"), and THE FIRST NATIONAL BANK OF
CHICAGO, a national banking association, solely as eligible lender trustee and
not in its individual capacity (the "Eligible Lender Trustee").
WHEREAS the Issuer desires to purchase from the Seller (and,
with respect to legal title to the student loans, NBD as trustee on behalf of
the Seller) a portfolio of federally reinsured student loans purchased in the
ordinary course of business by the Seller; and
WHEREAS the Eligible Lender Trustee is willing to hold legal
title to, and serve as eligible lender trustee with respect to, such student
loans on behalf of the Issuer; and
WHEREAS the Servicer is willing to service such student loans
and undertake certain administrative functions with respect thereto.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions and Usage
Capitalized terms used but not defined herein are defined in
Appendix A to the Administration Agreement, dated as of April 19, 1999, among
the Issuer, the Seller, as Administrator, and HSBC Bank USA, as Indenture
Trustee, which also contains rules as to usage and construction that shall be
applicable herein.
ARTICLE II
Custody of Financed Student Loans
SECTION 2.01. Custody of Student Loan Files. To assure uniform
quality in servicing the Financed Student Loans and to reduce administrative
costs, the Issuer hereby revocably appoints the Servicer, and the Servicer
hereby accepts such appointment, to act for the benefit of the Issuer and the
Indenture Trustee as Custodian of the following documents or instruments which
are hereby constructively delivered to the Indenture Trustee, as pledgee of the
Issuer (or will be constructively delivered to the Indenture Trustee, as pledgee
of the Issuer, in the case of Delayed Delivery Loans, New Loans and Serial
Loans, as of the applicable Transfer Date, in the case of Qualified Substitute
Student Loans, as of the date of the relevant Assignment to the Issuer, in the
case of Consolidation Loans originated during the Revolving Period by the
Eligible Lender Trustee on behalf of the Issuer, as of the applicable date of
origination or in the case of Consolidation Loans the principal balances of
which are increased by the principal balances of any related Add-on
Consolidation Loans, as of the applicable Add-on Consolidation Loan Funding
Date) with respect to each Financed Student Loan:
(a) the original fully executed copy of the note evidencing
the Financed Student Loan (including the original loan application
fully executed by the Borrower); and
(b) any and all other documents and computerized records that
the Servicer shall keep on file, in accordance with its customary
procedures, relating to such Financed Student Loan or any Obligor with
respect thereto.
SECTION 2.02. Duties of Servicer as Custodian.
(a)Safekeeping. The Servicer shall maintain custody of the
Student Loan Files for the benefit of the Issuer and the Indenture Trustee on
behalf of the Noteholders and the Swap Counterparty and maintain such accurate
and complete accounts, records and computer systems pertaining to each Student
Loan File as shall enable the Issuer to comply with the Basic Documents. In
performing its duties as custodian, the Servicer shall act with reasonable care,
using that degree of skill and attention that the Servicer exercises with
respect to the student loan files relating to all comparable Student Loans that
the Servicer services and shall ensure that it complies with all applicable
federal and state laws, including the Higher Education Act, with respect
thereto. The Servicer shall conduct, or cause to be conducted, periodic audits
of the Student Loan Files held by it under this Agreement and of the related
accounts, records and computer systems, in such a manner as shall enable the
Issuer, the Indenture Trustee or the Swap Counterparty to verify the accuracy of
the Servicer's record keeping. The Servicer shall promptly report to the Issuer,
the Indenture Trustee and the Swap Counterparty any failure on its part to hold
the Student Loan Files and maintain its accounts, records and computer systems
as herein provided and promptly take appropriate action to remedy any such
failure. Nothing herein shall be deemed to require an initial review or any
periodic review by the Issuer, the Eligible Lender Trustee or the Indenture
Trustee of the Student Loan Files.
(b) Maintenance of Records. The Servicer shall maintain each
Student Loan File at one of the locations specified in Schedule A to this
Agreement or at such other office as shall be specified by written notice to the
Issuer, the Indenture Trustee and the Swap Counterparty not later than 90 days
after any change in location. Upon reasonable prior notice of not less than
three Business Days, the Servicer shall make available to the Issuer, the
Indenture Trustee and the Swap Counterparty or their respective duly authorized
representatives, attorneys or auditors a list of locations of the Student Loan
Files and the related accounts, records and computer systems maintained by the
Servicer.
(c) Release of Documents. Upon instruction from the Indenture
Trustee, the Servicer shall, as soon as practicable, release any Student Loan
File to the Indenture Trustee, the Indenture Trustee's agent, or the Indenture
Trustee's designee, as the case may be, at such place or places as the Indenture
Trustee may designate.
SECTION 2.03. Instructions; Authority To Act. The Servicer
shall be deemed to have received proper instructions with respect to the Student
Loan Files upon its receipt of written instructions signed by a Responsible
Officer of the Indenture Trustee.
SECTION 2.04. Custodian's Indemnification. The Servicer as
Custodian shall pay for any actual loss, liability or expense, including
reasonable attorneys' fees, that may be
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imposed on, incurred by or asserted against the Issuer, the Eligible Lender
Trustee or the Indenture Trustee or any of their officers, directors, employees
and agents as a result of any improper act or omission in any way relating to
the maintenance and custody by the Servicer as Custodian of the Student Loan
Files as required by this Agreement where the final determination that any such
improper act or omission by the Servicer resulted in such loss, liability or
expense is established by a court of law, by an arbitrator, or by way of
settlement agreed to by the Servicer; provided, however, that the amount of any
liability with respect to any Financed Student Loan shall not exceed the amount
that would have been paid if such Student Loan had been accepted and paid by the
related Guarantor as a claim, and provided, further, that the Servicer shall not
be liable to the Eligible Lender Trustee for any portion of any such amount
resulting from the willful misfeasance, bad faith or negligence of the Eligible
Lender Trustee and the Servicer shall not be liable to the Indenture Trustee for
any portion of any such amount resulting from the willful misfeasance, bad faith
or negligence of the Indenture Trustee. This provision shall not be construed to
limit the Servicer's or any other party's rights, obligations, liabilities,
claims or defenses which arise as a matter of law or pursuant to any other
provision of this Agreement.
SECTION 2.05. Effective Period and Termination. The
appointment of Loan Services as Custodian shall become effective as of the
Closing Date and shall continue in full force and effect for so long as Loan
Services shall remain the Servicer hereunder. If all the rights and obligations
of Loan Services shall have been terminated under Section 6.01, the appointment
of Loan Services as Custodian shall be terminated simultaneously with the
effectiveness of such termination. As soon as practicable on or after any
termination of such appointment and in any event within ninety (90) days, Loan
Services shall deliver possession of the Student Loan Files to the Indenture
Trustee or the Indenture Trustee's agent at such place or places as the
Indenture Trustee may reasonably designate. Loan Services will continue to hold
the Student Loan Files as agent of the Indenture Trustee until the Student Loan
Files are transferred.
ARTICLE III
Administration and Servicing of Student Loans
SECTION 3.01. Duties of Servicer. The Servicer, for the
benefit of the Issuer (to the extent provided herein), the Noteholders and the
Swap Counterparty, shall manage, service, administer and make collections on the
Financed Student Loans with reasonable care, using that degree of skill and
attention that the Servicer exercises with respect to all comparable Student
Loans that it services. Without limiting the generality of the foregoing or of
any other provision set forth in this Agreement and notwithstanding any other
provision to the contrary set forth herein, the Servicer shall manage, service,
administer and make collections with respect to the Financed Student Loans
(other than collection of any Interest Subsidy Payments and Special Allowance
Payments, which the Eligible Lender Trustee will perform on behalf of the Trust)
in accordance with, and otherwise comply with, all applicable federal and state
laws, including any applicable standards, guidelines and requirements of the
Higher Education Act and the applicable Guarantee Agreement, the failure to
comply with which would adversely affect the eligibility of one or more of the
Financed Student Loans for federal reinsurance or Interest Subsidy Payments,
Special Allowance Payments or Guarantee Payments or would have an adverse effect
on the
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Noteholders, the Swap Counterparty or the Company. The Servicer also
hereby acknowledges that its obligation to service the Financed Student Loans
includes all Consolidation Loans originated by the Issuer during the Revolving
Period, any Consolidation Loan supplemented from time to time during and after
the Revolving Period by the addition of the principal balance of any related
Add-on Consolidation Loan, any Qualified Substitute Student Loans conveyed to
the Issuer pursuant to Section 3.02 of the Loan Sale Agreement and those Delayed
Delivery Loans, New Loans and Serial Loans conveyed to the Eligible Lender
Trustee on behalf of the Trust pursuant to Section 2.02 of the Loan Sale
Agreement and the related Transfer Agreement, a copy of which shall be delivered
to the Servicer by the Seller promptly upon execution thereof; provided,
however, that any failure by the Seller to so deliver a Transfer Agreement shall
not affect the Servicer's obligations hereunder to service all the Financed
Student Loans.
The Servicer's duties shall include collection and posting of all
payments, responding to inquiries of borrowers on such Financed Student Loans,
monitoring borrowers' status, making required disclosures to borrowers,
investigating delinquencies, sending payment coupons to borrowers and otherwise
establishing repayment terms, reporting tax information to borrowers, if
applicable, accounting for collections and furnishing monthly and annual
statements with respect thereto to the Administrator. Subject to the provisions
of Section 3.02, the Servicer shall follow its customary standards, policies and
procedures in performing its duties as Servicer. Without limiting the generality
of the foregoing, the Servicer is authorized and empowered to execute and
deliver, on behalf of itself, the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Company and the Noteholders or any of them, instruments
of satisfaction or cancellation, or partial or full release or discharge, and
all other comparable instruments, with respect to such Financed Student Loans;
provided, however, that the Servicer agrees that it will not (a) permit any
rescission or cancellation of a Financed Student Loan except as ordered by a
court of competent jurisdiction or governmental authority or as otherwise
consented to in writing by the Eligible Lender Trustee and the Indenture Trustee
or (b) reschedule, revise, defer or otherwise compromise with respect to
payments due on any Financed Student Loan except pursuant to any applicable
Deferral or Forbearance periods or otherwise in accordance with all applicable
standards, guidelines and requirements with respect to the servicing of the
Financed Student Loans; and provided, further, that the Servicer shall not agree
to any decrease of the interest rate on, or the principal amount payable with
respect to, any Financed Student Loan.
The Servicer, for the benefit of the Issuer (to the extent provided
herein) and the Indenture Trustee on behalf of the Noteholders, shall promptly
and routinely furnish the Eligible Lender Trustee and the Indenture Trustee with
copies of all material reports, records, and other documents and data as
required by this Agreement or as may otherwise be required by the Higher
Education Act. All material correspondence received by the Servicer relating to
individual Student Loans shall be maintained in microcopy form or in summary
form in an automated history file established by the Servicer. The Servicer
shall furnish in good condition all forms and supplies as specified in this
Agreement and any Schedules hereto. The Eligible Lender Trustee and the
Indenture Trustee may transmit Financed Student Loan account data to the
Servicer on these forms or by any other mutually acceptable means. In performing
its duties hereunder, the Servicer will be guided by and comply with the Higher
Education Act and applicable requirements of the related Guarantor. The Servicer
agrees to produce a clear and
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precise audit trail for each Financed Student Loan and to comply with such other
reporting, servicing, and operating standards as are contained in this
Agreement.
The Eligible Lender Trustee on behalf of the Issuer hereby grants a
power of attorney and all necessary authorization to the Servicer to maintain
any and all collection procedures with respect to the Financed Student Loans,
including filing, pursuing and recovering claims against the Guarantors for
Guarantee Payments and taking any steps to enforce such Financed Student Loans
such as commencing a legal proceeding to enforce a Financed Student Loan in the
name of the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the
Company or the Noteholders. The Eligible Lender Trustee or the Indenture Trustee
shall upon the written request of the Servicer or the Administrator furnish the
Servicer or the Administrator with any other powers of attorney and other
documents reasonably necessary or appropriate to enable the Servicer or the
Administrator to carry out their servicing and administrative duties hereunder.
SECTION 3.02. Collection of Student Loan Payments. (a) The
Servicer shall make reasonable efforts (including all efforts that may be
specified under the Higher Education Act or any Guarantee Agreement) to collect
all payments called for under the terms and provisions of the Financed Student
Loans as and when the same shall become due and shall follow such collection
procedures as it follows with respect to all comparable Student Loans that it
services. The Servicer shall allocate collections with respect to the Financed
Student Loans between principal and interest in accordance with the terms of
each such loan. The Servicer may in its discretion waive any late payment charge
or any other fees that may be collected in the ordinary course of servicing a
Financed Student Loan.
(b) The Servicer shall make reasonable efforts to claim,
pursue and collect all Guarantee Payments from the Guarantors pursuant to the
Guarantee Agreements with respect to any of the Financed Student Loans as and
when the same shall become due and payable, shall comply with the Higher
Education Act and all other applicable laws and agreements with respect to
claiming, pursuing and collecting such payments and shall follow such practices
and procedures as it follows with respect to all comparable guarantee agreements
and student loans that it services. In connection therewith, the Servicer is
hereby authorized and empowered to convey to the related Guarantor the note and
the related Student Loan File representing any Financed Student Loan in
connection with submitting a claim to the applicable Guarantor for a Guarantee
Payment in accordance with the terms of the applicable Guarantee Agreement.
(c) The Eligible Lender Trustee shall, with the assistance of
the Servicer as set forth below and on behalf of the Issuer, make reasonable
efforts to claim, pursue and collect all Interest Subsidy Payments and Special
Allowance Payments from the Department with respect to any of the Financed
Student Loans as and when the same shall become due and payable, shall comply
with all applicable laws and agreements with respect to claiming, pursuing and
collecting such payments and shall follow such practices and procedures as the
Servicer follows with respect to Student Loans serviced by it. All amounts so
collected by the Eligible Lender Trustee with respect to Financed Student Loans
(net, for the first Collection Period, of interest accrued prior to the Cutoff
Date that is not to be capitalized) shall constitute Monthly Available Funds for
the applicable Monthly Collection Period and Available Funds for the applicable
Collection Period, and shall be deposited into the Collection Account in
accordance with Section 4.01. In
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connection therewith, the Servicer shall prepare and file with the Department on
a timely basis all claims forms and other documents and filings necessary or
appropriate in connection with the claiming of Interest Subsidy Payments and
Special Allowance Payments on behalf of the Eligible Lender Trustee and shall
otherwise assist the Eligible Lender Trustee in pursuing and collecting such
Interest Subsidy Payments and Special Allowance Payments from the Department.
The Eligible Lender Trustee shall upon the written request of the Servicer
furnish the Servicer with any power of attorney and other documents reasonably
necessary or appropriate to enable the Servicer to prepare and file such claims
forms and other documents and filings.
The Eligible Lender Trustee may permit trusts, other than the Trust,
established by the Seller to securitize student loans to use the Department
lender identification number applicable to the Trust. In such event, the
Eligible Lender Trustee may claim and collect Interest Subsidy Payments and
Special Allowance Payments with respect to Financed Student Loans in the Trust
and student loans in such other trusts using such common lender identification
number. Notwithstanding anything herein or in the Basic Documents to the
contrary, any amounts assessed against payments (including, but not limited to,
Interest Subsidy Payments and Special Allowance Payments) due from the
Department to any such other trust using such common lender identification
number as a result of amounts (including, but not limited to, Consolidation
Fees) owing to the Department from the Trust will be deemed for all purposes
hereof and of the Basic Documents (including for purposes of determining amounts
paid by the Department with respect to the student loans in the Trust and such
other trust) to have been assessed against the Trust and shall be deducted by
the Eligible Lender Trustee or the Servicer and paid to such other trust from
any collections made by them which would otherwise have been payable to the
Collection Account for the Trust. If so specified in the servicing agreement
applicable to any such other trust, any amounts assessed against payments due
from the Department to the Trust as a result of amounts owing to the Department
from such other trust using such common lender identification number will be
deemed to have been assessed against such other trust and will be deducted by
the Eligible Lender Trustee or the Servicer from any collections made by them
which would otherwise be payable to the collection account for such other trust
and paid to the Trust.
SECTION 3.03. Realization upon Student Loans. For the benefit
of the Issuer, the Servicer shall use reasonable efforts consistent with its
customary servicing practices and procedures and including all efforts that may
be specified under the Higher Education Act or the applicable Guarantee
Agreement in its servicing of any delinquent Financed Student Loans.
SECTION 3.04. No Impairment. The Servicer shall not impair
the rights of the Issuer, the Eligible Lender Trustee, the Indenture Trustee,
the Company, the Noteholders or the Swap Counterparty in the Financed Student
Loans.
SECTION 3.05. Purchase of Student Loans; Reimbursement. (a)
Upon the discovery by the Servicer, the Eligible Lender Trustee, the Indenture
Trustee or the Seller of any breach pursuant to Sections 3.01, 3.02, 3.03 or
3.04 hereof, the party discovering the breach shall give prompt written notice
to the others. If the breach is not cured within sixty (60) days after the
Servicer becomes aware or receives written notice (whichever is earlier) of such
breach, the Servicer shall purchase or arrange for the purchase of any Student
Loan in which the interests of
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the Noteholders, the Issuer, the Indenture Trustee, the Eligible Lender Trustee
or the Swap Counterparty are materially and adversely affected by such breach as
of the first day succeeding the end of such 60-day period that is the last day
of a Monthly Collection Period (it being understood that any such breach that
does not affect the related Guarantor's obligation to guarantee payment of such
Student Loan will not be considered to have a material adverse effect for this
purpose and it being further understood that any dispute as to whether such
Guarantor's obligation has been so affected so as to create such a material
adverse effect, shall be resolved, for so long as the Notes are Outstanding, by
the Indenture Trustee, whose determination shall be dispositive, and after the
Notes are no longer Outstanding, by the Eligible Lender Trustee, whose
determination shall then be dispositive); provided, however, that during each
12-month period following the Cutoff Date or an anniversary of the Cutoff Date
(each, a "Servicer Liability Period"), the Servicer will be obligated to
purchase Student Loans only to the extent its total liability incurred during
the then current Servicer Liability Period for such purchases and any other
liabilities under this Agreement exceeds an amount (the "Servicer Liability
Limit") equal to 0.15% of the principal balances of the Financed Student Loans
outstanding as of the Cutoff Date or, after the first anniversary of the Cutoff
Date, as of the preceding July 31.
(d) In consideration of the purchase of any such Student Loan
pursuant to this Section 3.05, the Servicer shall remit, in the manner specified
in Section 4.01, the Purchase Amount and the Issuer shall execute such
assignments and other documents reasonably requested by the Servicer in order to
effect the transfer of such Student Loan to the Servicer or its designee;
provided, however, that the Servicer's total liability for losses for rejected
claims by the Guarantors for any Financed Student Loan based on any breach
pursuant to Sections 3.01, 3.02, 3.03 or 3.04 hereof will not exceed that amount
which the related Guarantor would have been obligated to pay with respect to
such loan had its obligation to guarantee payment thereof not been affected by
the Servicer's breach. Subject to Section 5.02, the exclusive remedy of the
Noteholders, the Issuer, the Indenture Trustee, and the Eligible Lender Trustee
and the entire liability of Servicer for such a breach shall be limited to
requiring the Servicer to purchase Financed Student Loans pursuant to this
Section 3.05.
SECTION 3.06. Servicing Fee. The Servicing Fee for each
calendar month (the "Servicing Fee") shall be equal to the lesser of (a)
one-twelfth of 0.60% or such larger percentage approved by the Rating Agencies,
not to exceed 1.00% (or of 0.50% with respect to any calendar month beginning
with July 2009) of the aggregate principal balances of the Financed Student
Loans outstanding as of the last day of the preceding calendar month and (b) the
sum of (i) one-twelfth of the In-School Percentage of the principal balance of
each Billing Account relating to a Financed Student Loan as of the last day of
the preceding calendar month which was an In-School Loan on such date or, if the
average principal balance of Billing Accounts relating to In-School Loans as of
such date was $2,500 or less, $1.50 per Billing Account, (ii) one-twelfth of the
GRDF Percentage of the principal balance as of the last day of the preceding
calendar month of each Billing Account relating to a Financed Student Loan which
was a Grace, Repayment, Deferral or Forbearance Student Loan as of such date or,
if the average principal balance of such Billing Accounts as of such date was
$3,000 or less, $3.00 per Billing Account, (iii) a fee of $1.00 for each
notification sent by the Servicer during the preceding calendar month on behalf
of the Trust to a borrower providing information to such borrower with respect
to Federal Consolidation Loan programs, (iv) a one-time fee of $75.00 for each
Federal
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Consolidation Loan originated by the Eligible Lender Trustee on behalf
of the Trust during the preceding calendar month, (v) a fee of $25.00 for each
Financed Student Loan for which, during the preceding calendar month, claim
documentation was completed and provided to the Guarantor or for which the
Servicer performed bankruptcy or ineligible Billing Account processing (that, in
the case of ineligible Billing Account processing, resulted in a demand letter
being sent to the borrower), in each case as required by the claims processing
requirements of the Guarantor, (vi) a fee of $.05 per Financed Student Loan for
storing and warehousing the applicable loan documentation for each such loan
during the preceding calendar month, (vii) a one-time fee of $0.40 for each
Billing Account transferred by the Seller to the Trust during the preceding
calendar month, (viii) a fee equal to one-twelfth of the product of (A) the
aggregate outstanding principal balance of the Financed Student Loans as of the
last day of the preceding calendar month and (B) .05%, which fee will be payable
so long as 34 C.F.R. ss. 682.413 or any successor section remains in effect and
(ix) a fee of $70.00 per hour for system development requests made by the
Eligible Lender Trustee on behalf of the Trust and provided by the Servicer
during the preceding calendar month. For purposes of making the determinations
set forth in clauses (i) and (ii) of the preceding sentence, the "In-School
Percentage" and "GRDF Percentage" shall each be determined based on the average
principal balance of the Billing Accounts relating to the In-School Loans and
the Billing Accounts relating to the Grace, Repayment, Deferral and Forbearance
Loans, respectively, as of the last day of the preceding calendar month, as
follows:
Average Principal In-School Average Principal GRDF Percentage
Balance Percentage Balance
-------------------- ------------- ------------------- -------------------
$2,501 - $3,000 0.625% $3,001 - $3,400 1.100%
$3,001 - $3,500 0.525% $3,401 - $3,900 0.950%
$3,501 - $4,000 0.450% $3,901 - $4,400 0.830%
$4,001 - $4,750 0.375% $4,401 - $4,800 0.740%
$4,751 - $5,500 0.310% $4,801 - $5,400 0.650%
$5,501 - $6,250 0.260% $5,401 - $6,000 0.575%
$6,251 and above 0.230% $6,001 - $6,600 0.510%
6,601 - $7,200 0.475%
$7,201 - $10,000 0.450%
$10,001 - $13,000 0.350%
$13,001 and above 0.300%
The Servicing Fee (together with any portion of the Servicing Fee that
remains unpaid from prior Monthly Payment Dates) will be payable on each Monthly
Payment Date and will be paid solely out of Monthly Available Funds in the case
of each Monthly Payment Date that is not a Quarterly Payment Date (and out of
Available Funds in the case of each Quarterly Payment Date) and amounts on
deposit in the Reserve Account on such Monthly Payment Date (including each
Quarterly Payment Date) as provided in Sections 2(d)(iv)(A), 2(d)(v)(A) and
2(e)(iv)(A) of the Administration Agreement. To the extent that, for any Monthly
Payment Date, the Servicing Fee is the amount calculated as described in clause
(a) of the first sentence of the preceding paragraph, then an amount (the
"Servicing Fee Shortfall") equal to the excess of the amount described in clause
(b) of such sentence over the amount described in clause (a) of such sentence
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shall be payable on the next succeeding Quarterly Payment Date (or if such
Monthly Payment Date is also a Quarterly Payment Date, on such Quarterly Payment
Date) from any remaining Reserve Account Excess as provided in Section 2(e)(ii)
of the Administration Agreement. To the extent such remaining Available Funds
are insufficient to pay the Servicing Fee Shortfall on any Distribution Date,
the Seller shall be required to pay any unpaid Servicing Fee Shortfall directly
to the Servicer out of its own funds. The Servicer will be obligated to perform
its servicing obligations whether or not it receives any amounts in respect of
Servicing Fee Shortfalls.
SECTION 3.07. Servicer's Report. On or before the fifteenth
day of each month (or, if any such day is not a Business Day, on the next
succeeding Business Day), the Servicer shall deliver to the Administrator a
servicer's report with respect to the preceding calendar month containing all
information necessary for the Administrator to prepare the Administrator's
Certificate, referred to in Section 2(b)(ii) of the Administration Agreement,
covering such preceding calendar month.
SECTION 3.08. Annual Statement as to Compliance; Notice of
Default. (a) The Servicer shall deliver to the Eligible Lender Trustee, the
Indenture Trustee and the Swap Counterparty (with a copy to the Seller), on or
before April 30 of each year beginning April 30, 2000, an Officers' Certificate
of the Servicer, dated as of December 31 of the preceding year, stating that (i)
a review of the activities of the Servicer during the preceding 12-month period
(or, in the case of the first such certificate, during the period from the
Closing Date to December 31, 1999 or, as specified below, to September 30, 1999)
and of its performance has been made under such officers' supervision and (ii)
to the best of such officers' knowledge, based on such review, the Servicer has
fulfilled all its obligations under this Agreement in all material respects
throughout such year (or in the case of the first such Officers' Certificate,
such shorter period) or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officers and the
nature and status thereof; provided, however, that, at the option of the
Servicer, the Servicer may date the initial such Officers' Certificate as of
September 30, 1999, and, in such case, shall deliver such Officer's Certificate
on or before December 31, 1999 and thereafter shall deliver such Officer's
Certificate, dated as of September 30 of each succeeding year, on or before
December 31 of such year. The Indenture Trustee shall send a copy of each such
Officers' Certificate and each report referred to in this Section 3.08 to the
Rating Agencies. A copy of each such Officers' Certificate and each report
referred to in this Section 3.08 may be obtained by any Noteholder or Note Owner
by a request in writing to the Eligible Lender Trustee addressed to its
Corporate Trust Office, together with evidence satisfactory to the Eligible
Lender Trustee that such Person is one of the foregoing parties. Upon the
telephone request of the Eligible Lender Trustee, the Indenture Trustee will
promptly furnish the Eligible Lender Trustee a list of Noteholders as of the
date specified by the Eligible Lender Trustee.
(b) The Servicer shall deliver to the Eligible Lender Trustee,
the Indenture Trustee, the Seller, the Swap Counterparty and the Rating
Agencies, promptly after having obtained knowledge thereof, but in no event
later than five Business Days thereafter, written notice in an Officers'
Certificate of the Servicer of any event which with the giving of notice or
lapse of time, or both, would become a Servicer Default under Section 6.01 or
would cause the Servicer to fail to meet any Rating Agency Condition.
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SECTION 3.09. Annual Independent Certified Public Accountants'
Report. The Servicer shall cause a firm of independent certified public
accountants, which may also render other services to the Servicer, the Seller or
their Affiliates, to deliver to the Eligible Lender Trustee, the Indenture
Trustee and the Swap Counterparty (with a copy to the Seller) within 180 days of
the end of the Servicer's regular fiscal-year ended September 30 or
calendar-year audit period, an audit report that encompasses the Servicer's
portion of the annual Lender Audit (as defined in the Higher Education Act), or
any successor thereto, as required of a lender under the Higher Education Act,
for the preceding year (or, in the case of the first such report, during the
period from the Closing Date to December 31, 1999 or, as the case may be, to
September 30, 1999). The Indenture Trustee shall send a copy of each such report
to the Rating Agencies.
Such report will also indicate that the firm is independent of
the Servicer within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public Accountants.
SECTION 3.10. Access to Certain Documentation and Information
Regarding Financed Student Loans. Upon at least three Business Days' prior
notice, the Servicer shall provide the Noteholders access to the Student Loan
Files in such cases where the Noteholders shall be required by applicable
statutes or regulations to review such documentation, as demonstrated by
evidence satisfactory to the Servicer in its reasonable judgment. Access shall
be afforded without charge, but only upon reasonable request and during the
normal business hours at the respective offices of the Servicer. Nothing in this
Section shall affect the obligation of the Servicer to observe any applicable
law prohibiting disclosure of information regarding the Obligors and the failure
of the Servicer to provide access to information as a result of such obligation
shall not constitute a breach of this Section.
SECTION 3.11. Servicer Expenses. The Servicer shall be
required to pay all expenses incurred by it in connection with its activities
hereunder, including fees and disbursements of independent accountants, taxes
imposed on the Servicer, and expenses incurred in connection with distributions
and reports to the Administrator or the Noteholders, as the case may be.
SECTION 3.12. Appointment of Subservicer. The Servicer may at
any time appoint a subservicer to perform all or any portion of its obligations
as Servicer hereunder; provided, however, that the Rating Agency Condition shall
have been satisfied in connection therewith; and provided, further, that the
Servicer shall remain obligated and be liable to the Issuer, the Eligible Lender
Trustee, the Indenture Trustee and the Noteholders for the servicing and
administering of the Financed Student Loans in accordance with the provisions
hereof without diminution of such obligation and liability by virtue of the
appointment of such subservicer and to the same extent and under the same terms
and conditions as if the Servicer alone were servicing and administering the
Financed Student Loans. The fees and expenses of the subservicer shall be as
agreed between the Servicer and its subservicer from time to time and none of
the Issuer, the Eligible Lender Trustee, the Indenture Trustee or the
Noteholders shall have any responsibility therefor.
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ARTICLE IV
Deposits into the Collection Account
SECTION 4.01. Deposits into the Collection Account. (a)
The Servicer shall deposit into the Collection Account (in the case of clauses
(i) and (ii) within two Business Days of receipt of freely available funds
therefor):
(i) all identifiable payments received by the Servicer by or
on behalf of Obligors on the Financed Student Loans, including any
Guarantee Payments with respect to the Financed Student Loans;
(ii) all Liquidation Proceeds on the Financed Student Loans;
(iii) with respect to Purchased Student Loans, the aggregate
Purchase Amounts, when such amounts are due, as provided in Section
3.05 hereof; and
(iv) all other amounts required to be deposited into the
Collection Account by the Servicer pursuant to the terms hereof.
(v) The Eligible Lender Trustee shall deposit into the
Collection Account within two Business Days of the receipt thereof, the
aggregate amount of Interest Subsidy Payments and Special Allowance Payments
received by it with respect to the Financed Student Loans.
(vi) The Seller shall deposit into the Collection Account, the
aggregate Purchase Amount with respect to Purchased Student Loans and all other
amounts to be paid by the Seller under Section 3.02 and 5.01 of the Loan Sale
Agreement when such amounts are due, as provided in Section 3.03 of the Loan
Sale Agreement.
(vii) The Indenture Trustee, at the written direction of the
Administrator, shall withdraw from the Collateral Reinvestment Account and
deposit into the Collection Account on each Determination Date during the
Revolving Period, an amount equal to the Capitalized Interest Amount for the
preceding Collection Period, as provided in Section 2(f) of the Administration
Agreement.
(viii) The Indenture Trustee, at the written direction of the
Administrator, shall withdraw from the Collateral Reinvestment Account and
deposit into the Collection Account on any date during the Revolving Period
specified by the Administrator, such amounts as the Administrator may determine
are needed to make required distributions from Monthly Available Funds or
Available Funds, as the case may be, on Monthly Payment Dates.
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ARTICLE V
The Servicer
SECTION 5.01. Representations of Servicer. The Servicer makes
the following representations on which the Issuer is deemed to have relied in
acquiring (through the Eligible Lender Trustee) the Financed Student Loans and
appointing the Servicer as servicer hereunder. The representations speak as of
the execution and delivery of this Agreement and as of the Closing Date in the
case of the Initial Financed Student Loans, and will be deemed to speak as of
the applicable Transfer Date, in the case of Delayed Delivery Loans, New Loans
and Serial Loans, as of the date of the relevant Assignment in the case of any
Qualified Substitute Student Loan, as of the date of origination in the case of
any Consolidation Loan added to the Trust during the Revolving Period and as of
the applicable Add-on Consolidation Loan Funding Date in the case of any
Consolidation Loan the principal balance of which has been increased by the
principal balance of a related Add-on Consolidation Loan, but shall survive the
sale, transfer and assignment of the Financed Student Loans to the Eligible
Lender Trustee on behalf of the Issuer (and the origination of such
Consolidation Loans) and the pledge thereof to the Indenture Trustee pursuant to
the Indenture.
(a) Organization and Good Standing. The Servicer is duly
organized and validly existing as a corporation in good standing under
the laws of the State of Delaware, with the power and authority to own
its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and has the
legal right to service the Financed Student Loans.
(b) Power and Authority of the Servicer. The Servicer has the
corporate power and authority to execute and deliver this Agreement and
to carry out its terms, and the execution, delivery and performance of
this Agreement have been duly authorized by the Servicer by all
necessary corporate action.
(c) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of the Servicer, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency,
reorganization and similar laws relating to creditors' rights generally
and subject to general principles of equity.
(d) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
or thereof do not conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse
of time or both) a default under, the certificate of incorporation or
by-laws of the Servicer, or any indenture, agreement or other
instrument to which the Servicer is a party or by which it shall be
bound; or result in the creation or imposition of any Lien upon any of
its properties pursuant to the terms of any such indenture, agreement
or other instrument; or violate any law or, to the knowledge of the
Servicer, any order, rule or regulation applicable to the Servicer of
any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Servicer or its properties. Performance by the Servicer of its
servicing duties
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with respect to the Financed Student Loans, and compliance by the
Servicer with the terms of this Agreement, will not result in the loss
of any Guarantee Payments by the Trust or any reinsurance payments
with respect to any Financed Student Loan by the applicable Guarantor.
(e) No Proceedings. There are no proceedings or investigations
pending against the Servicer or, to its best knowledge, threatened
against the Servicer, before any court, regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Servicer or its properties: (i) asserting the invalidity of this
Agreement or any of the other Basic Documents to which the Servicer is
a party, (ii) seeking to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by this Agreement,
or any of the other Basic Documents, (iii) seeking any determination or
ruling that could reasonably be expected to have a material and adverse
effect on the performance by the Servicer of its obligations under, or
the validity or enforceability of, this Agreement, any of the other
Basic Documents or the Notes or (iv) seeking to affect adversely the
federal or state income tax attributes of the Issuer or the Notes.
(f) All Consents. All authorizations, consents, licenses,
orders or approvals of or registrations or declarations with any court,
regulatory body, administrative agency or other government
instrumentality required to be obtained, effected or given by the
Servicer in connection with the execution and delivery by the Servicer
of this Agreement and the performance by the Servicer of its duties
contemplated by this Agreement have in each case been duly obtained,
effected or given and are in full force and effect.
SECTION 5.02. Indemnities of Servicer. (a) The Servicer shall
be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Servicer under this Agreement.
The Servicer shall pay for any loss, liability or expense,
including reasonable attorneys' fees, that may be imposed on, incurred by or
asserted against the Issuer, the Eligible Lender Trustee, the Indenture Trustee,
the Seller, the Administrator or the Noteholders or any of the officers,
directors, employees and agents of the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Administrator or the Seller to the extent that such loss,
liability or expense arose out of, or was imposed upon any such Person through,
the negligence, willful misfeasance or bad faith of the Servicer in the
performance of its obligations and duties under this Agreement or by reason of
the reckless disregard of its obligations and duties under this Agreement, where
the final determination that any such loss, liability or expense arose out of,
or was imposed upon any such Person through, any such negligence, willful
misfeasance, bad faith or recklessness on the part of the Servicer is
established by a court of law, by an arbitrator or by way of settlement agreed
to by the Servicer; provided, however, that the Servicer's obligation arising
under this Section 5.02 shall apply only to the extent that the sum of such
obligation and any other liabilities of the Servicer under this Agreement
exceeds the Servicer Liability Limit for any Servicer Liability Period (as such
terms are defined in Section 3.05). Notwithstanding the foregoing, if the
Servicer is rendered unable, in whole or in part, by a force outside the control
of the parties hereto (including acts of God, acts of war, fires, earthquakes
and other disasters) to
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satisfy its obligations under this Agreement, the Servicer shall not be deemed
to have breached any such obligation upon delivery of written notice of such
event to the other parties hereto, for so long as the Servicer remains unable
to perform such obligation as a result of such event.
For purposes of this Section, in the event of the termination
of the rights and obligations of Loan Services as Servicer pursuant to Section
6.01, or a resignation by such Servicer pursuant to this Agreement, such
Servicer shall be deemed to be the Servicer pending appointment of a successor
Servicer pursuant to Section 6.02.
Liability of the Servicer under this Section shall survive the
resignation or removal of the Eligible Lender Trustee or the Indenture Trustee
or the termination of this Agreement and shall include reasonable fees and
expenses of counsel and expenses of litigation. If the Servicer shall have made
any indemnity payments pursuant to this Agreement and the Person to or on behalf
of whom such payments are made thereafter collects any of such amounts from
others, such Person shall promptly repay such amounts to the Servicer, without
interest.
(b) Except with respect to liabilities relating to rejected
claims by the Guarantors, the Seller agrees to indemnify and hold harmless the
Servicer from any liability incurred by the Servicer under subsection (a) above
as a result of the Servicer's ordinary negligence.
SECTION 5.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. The Servicer hereby agrees that, upon (a) any merger
or consolidation of the Servicer into another Person, (b) any merger or
consolidation to which the Servicer shall be a party resulting in the creation
of another Person or (c) any Person succeeding to the properties and assets of
the Servicer substantially as a whole, the Servicer shall (i) cause such Person
(if other than the Servicer) to execute an agreement of assumption to perform
every obligation of the Servicer hereunder, (ii) deliver to the Eligible Lender
Trustee, the Indenture Trustee and the Swap Counterparty an Officers'
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
and that all conditions precedent provided for in this Agreement relating to
such transaction have been complied with, (iii) cause the Rating Agency
Condition to have been satisfied with respect to such transaction and (iv) cure
any existing Servicer Default or any continuing event which, after notice or
lapse of time or both, would become a Servicer Default. Upon compliance with the
foregoing requirements, such Person shall be the successor to the Servicer under
this Agreement without further act on the part of any of the parties to this
Agreement. Notwithstanding anything herein to the contrary, compliance with
clauses (i), (ii), (iii) and (iv) above shall be conditions to the consummation
of any of the transactions referred to in clause (a), (b) or (c) above.
SECTION 5.04. Limitation on Liability of Servicer and Others.
Neither the Servicer nor any of the directors, officers, employees or agents of
the Servicer shall be under any liability to the Issuer or the Noteholders,
except as provided under this Agreement, for any action taken or for refraining
from the taking of any action pursuant to this Agreement or for errors in
judgment; provided, however, that this provision shall not protect the Servicer
or any such Person against any liability that would otherwise be imposed by
reason of willful misfeasance,
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bad faith or negligence in the performance of duties or by reason of reckless
disregard of obligations and duties under this Agreement. The Servicer and any
director, officer, employee or agent of the Servicer may rely in good faith on
any document of any kind prima facie properly executed and submitted by any
person respecting any matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not
be under any obligation to appear in, prosecute or defend any legal action that
shall not be incidental to its duties to service the Student Loans in accordance
with this Agreement and that in its opinion may involve it in any expense or
liability; provided, however, that the Servicer may undertake any reasonable
action that it may deem necessary or desirable in respect of this Agreement and
the other Basic Documents and the rights and duties of the parties to this
Agreement and the other Basic Documents and the interests of the Noteholders
under the Indenture.
SECTION 5.05. Loan Services Not to Resign as Servicer. Subject
to the provisions of Section 5.03, Loan Services shall not resign from the
obligations and duties hereby imposed on it as Servicer under this Agreement
except upon determination that the performance of its duties under this
Agreement shall no longer be permissible under applicable law. Notice of any
such determination permitting the resignation of Loan Services shall be
communicated to the Eligible Lender Trustee, the Indenture Trustee, the Rating
Agencies and the Swap Counterparty at the earliest practicable time (and, if
such communication is not in writing, shall be confirmed in writing at the
earliest practicable time) and any such determination shall be evidenced by an
Opinion of Counsel to such effect delivered to the Eligible Lender Trustee, the
Indenture Trustee and the Swap Counterparty concurrently with or promptly after
such notice. No such resignation shall become effective until the Indenture
Trustee or a Successor Servicer shall have assumed the responsibilities and
obligations of Loan Services in accordance with Section 6.02.
ARTICLE VI
Default
SECTION 6.01. Servicer Default. If any one of the following
events (each, a "Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to deliver to the Indenture
Trustee for deposit in any of the Trust Accounts any payment required
by the Basic Documents, which failure continues unremedied for three
Business Days after written notice of such failure is received by the
Servicer from the Eligible Lender Trustee, the Indenture Trustee or the
Administrator or after discovery of such failure by an officer of the
Servicer; or
(b) any failure by the Servicer duly to observe or to perform
in any material respect any other covenants or agreements of the
Servicer set forth in this Agreement or any other Basic Document, which
failure shall (i) materially and adversely affect the rights of
Noteholders or the Swap Counterparty and (ii) continue unremedied for a
period of thirty (30) days after the date of discovery of such failure
by an officer of the Servicer or on which written notice of such
failure, requiring the same to be remedied, shall have been given (A)
to the Servicer, by the Indenture Trustee, the Eligible Lender Trustee
or
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(B) to the Servicer, the Indenture Trustee, the Administrator and
the Eligible Lender Trustee by Noteholders representing not less than
25% of the Outstanding Amount of the Notes; or
(c) any limitation, suspension or termination by the
Department of the Servicer's eligibility to service Student Loans which
materially and adversely affects its ability to service the Financed
Student Loans; or
(d) an Insolvency Event occurs with respect to the
Servicer;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Indenture Trustee or the Noteholders of Notes
evidencing not less than 75% of the Outstanding Amount of the Notes by notice
then given in writing to the Servicer (and to the Indenture Trustee and the
Eligible Lender Trustee if given by the Noteholders) may terminate all the
rights and obligations (other than the obligations set forth in Section 5.02) of
the Servicer under this Agreement. On or after the receipt by the Servicer of
such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Notes, the Financed Student Loans or
otherwise, shall, without further action, pass to and be vested in the Indenture
Trustee or such successor Servicer as may be appointed under Section 6.02; and,
without limitation, the Indenture Trustee and the Eligible Lender Trustee are
hereby authorized and empowered to execute and deliver, for the benefit of the
predecessor Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments, and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and endorsement of the Financed Student Loans
and related documents, or otherwise. The predecessor Servicer shall cooperate
with the successor Servicer, the Indenture Trustee and the Eligible Lender
Trustee in effecting the termination of the responsibilities and rights of the
predecessor Servicer under this Agreement, including the transfer to the
successor Servicer for administration by it of all cash amounts that shall at
the time be held by the predecessor Servicer for deposit, or shall thereafter be
received by it with respect to a Financed Student Loan. All reasonable costs and
expenses (including attorneys' fees) incurred in connection with transferring
the Student Loan Files to the successor Servicer and amending this Agreement and
any other Basic Documents to reflect such succession as Servicer pursuant to
this Section shall be paid by the predecessor Servicer upon presentation of
reasonable documentation of such costs and expenses. Upon receipt of notice of
the occurrence of a Servicer Default, the Eligible Lender Trustee shall give
notice thereof to the Rating Agencies.
SECTION 6.02. Appointment of Successor. (a) Upon receipt by
the Servicer of notice of termination pursuant to Section 6.01, or the
resignation by the Servicer in accordance with the terms of this Agreement, the
predecessor Servicer shall continue to perform its functions as Servicer under
this Agreement, in the case of termination, only until the date specified in
such termination notice or, if no such date is specified in a notice of
termination, until receipt of such notice and, in the case of resignation, until
the later of (x) the date 120 days from the delivery to the Eligible Lender
Trustee, and the Indenture Trustee of written notice of such resignation (or
written confirmation of such notice) in accordance with the terms of this
Agreement and (y) the date upon which the predecessor Servicer shall become
unable to act as Servicer as specified in the notice of resignation and
accompanying Opinion of Counsel. In the event of the termination
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hereunder of the Servicer, the Issuer shall appoint a successor Servicer
acceptable to the Indenture Trustee, and the successor Servicer shall accept its
appointment by a written assumption in form acceptable to the Indenture Trustee
and the Administrator. In the event that a successor Servicer has not been
appointed at the time when the predecessor Servicer has ceased to act as
Servicer in accordance with this Section, the Indenture Trustee without further
action shall automatically be appointed the successor Servicer and the Indenture
Trustee shall be entitled to the Servicing Fee. Notwithstanding the above, the
Indenture Trustee shall, if it shall be unwilling or legally unable so to act,
appoint or petition a court of competent jurisdiction to appoint, any
established institution the regular business of which shall include the
servicing of student loans, as the successor to the Servicer under this
Agreement; provided, however, that such right to appoint or to petition for the
appointment of any such successor Servicer shall in no event relieve the
Indenture Trustee from any obligations otherwise imposed on it under the Basic
Documents until such successor has in fact assumed such appointment.
(b) Upon appointment, the successor Servicer (including the
Indenture Trustee acting as successor Servicer) shall be the successor in all
respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities placed on the predecessor Servicer that
arise thereafter or are related thereto and shall be entitled to an amount
agreed to by such successor Servicer (which shall not exceed the Servicing Fee,
unless such compensation arrangements will not result in a downgrading of the
Class A-1 Notes, the Class A-2 Notes or the Subordinate Notes by any Rating
Agency) and all the rights granted to the predecessor Servicer by the terms and
provisions of this Agreement.
(c) The Servicer may not resign unless it is prohibited from
serving as such by law as evidenced by an Opinion of Counsel to such effect
delivered to the Indenture Trustee and the Eligible Lender Trustee.
Notwithstanding the foregoing or anything to the contrary herein or in the other
Basic Documents, the Indenture Trustee, to the extent it is acting as successor
Servicer pursuant hereto, shall be entitled to resign to the extent a qualified
successor Servicer has been appointed and has assumed all the obligations of the
Servicer in accordance with the terms of this Agreement and the other Basic
Documents.
SECTION 6.03. Notification to Noteholders and the Company.
Upon any termination of, or appointment of a successor to, the Servicer pursuant
to this Article VI, the Indenture Trustee shall give prompt written notice
thereof to Noteholders, the Administrator, the Company, the Eligible Lender
Trustee and the Rating Agencies (which, in the case of any such appointment of a
successor, shall consist of prior written notice thereof to the Rating
Agencies).
SECTION 6.04. Waiver of Past Defaults. The Noteholders of
Notes evidencing not less than a majority of the Outstanding Amount of the Notes
may, on behalf of all Noteholders, waive in writing any default by the Servicer
in the performance of its obligations hereunder, and any consequences thereof,
except a default in making any required deposits to or payments from any of the
Trust Accounts (or giving instructions regarding the same) in accordance with
this Agreement to the extent provided in such waiver. Upon any such waiver of a
past default, such default shall cease to exist, and any Servicer Default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereto.
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ARTICLE VII
Miscellaneous
SECTION 7.01. Amendment. This Agreement may be amended by the
Servicer and the Eligible Lender Trustee, with the prior written consent of the
Indenture Trustee, but without the consent of any of the Noteholders, to cure
any ambiguity, to correct or supplement any provisions in this Agreement or for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions in this Agreement or of modifying in any manner the rights
of the Noteholders; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel delivered to the Eligible Lender Trustee and the
Indenture Trustee, adversely affect in any material respect the interests of any
Noteholder.
This Agreement may also be amended from time to time by the
Servicer and the Eligible Lender Trustee, with the prior written consent of the
Indenture Trustee, the Noteholders of Notes evidencing not less than a majority
of the Outstanding Amount of the Notes and the Swap Counterparty, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Noteholders; provided, however, that no such amendment shall (a) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments with respect to Financed Student Loans or distributions
that shall be required to be made for the benefit of the Noteholders or (b)
reduce the aforesaid percentage of the Outstanding Amount of the Notes, the
Noteholders of which are required to consent to any such amendment, without the
consent of all outstanding Noteholders; provided further, that the prior written
consent of the Swap Counterparty shall not be required if an Opinion of Counsel
is delivered to the Swap Counterparty stating that the proposed amendment to
this Agreement will not adversely affect in any material respect the interests
of the Noteholders or the Swap Counterparty.
Promptly after the execution of any such amendment or consent
(or, in the case of the Rating Agencies, five Business Days prior thereto), the
Eligible Lender Trustee shall furnish written notification of the substance of
such amendment or consent to the Indenture Trustee and each of the Rating
Agencies.
It shall not be necessary for the consent of Noteholders
pursuant to this Section to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof.
Prior to the execution of any amendment to this Agreement, the
Eligible Lender Trustee, the Indenture Trustee and the Swap Counterparty shall
be entitled to receive and rely upon an Opinion of Counsel stating that the
execution of such amendment is authorized or permitted by this Agreement and the
Opinion of Counsel referred to in Section 6.02(f) of the Loan Sale Agreement.
The Eligible Lender Trustee and the Indenture Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Eligible Lender
Trustee's or the Indenture Trustee's, as applicable, own rights, duties or
immunities under this Agreement or otherwise.
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SECTION 7.02. Protection of Interests in Trust. (a) The
Servicer shall not change its name, identity or corporate structure in any
manner that would, could or might make any financing statement or continuation
statement filed in accordance with Section 6.02(a) of the Loan Sale Agreement
seriously misleading within the meaning of ss. 9-402(7) of the UCC, unless it
shall have given the Eligible Lender Trustee, the Indenture Trustee, the Swap
Counterparty and the Rating Agencies at least five days' prior written notice
thereof and shall have promptly filed appropriate amendments to all previously
filed financing statements or continuation statements.
(b) The Servicer shall have an obligation to give the Eligible
Lender Trustee, the Indenture Trustee and the Swap Counterparty at least sixty
(60) days' prior written notice of any relocation of its principal executive
office if, as a result of such relocation, the applicable provisions of the UCC
would require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement and shall promptly file
any such amendment. The Servicer shall at all times maintain each office from
which it shall service Financed Student Loans, and its principal executive
office, within the United States of America.
(c) The Servicer shall maintain accounts and records of each
Student Loan accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Financed Student Loan, including
payments and recoveries made and payments owing (and the nature of each) and
(ii) reconciliation between payments or recoveries on (or with respect to) each
Financed Student Loan and the amounts from time to time deposited in the
Collection Account in respect of such Financed Student Loan.
(d) The Servicer shall, by use of a distinct identification
code, maintain its computer systems so that, from and after the time of sale
under this Agreement of the Financed Student Loans, the Servicer's master
computer records (including any backup archives) that refer to a Student Loan
shall indicate clearly the interest of the Issuer, the Eligible Lender Trustee
and the Indenture Trustee in such Student Loan and that such Student Loan is
owned by the Eligible Lender Trustee on behalf of the Issuer and has been
pledged to the Indenture Trustee. Indication of the Issuer's, the Eligible
Lender Trustee's and the Indenture Trustee's interest in a Student Loan shall be
deleted from or modified on the Servicer's computer systems when, and only when,
the related Financed Student Loan shall have been paid in full or repurchased.
(e) If at any time the Servicer shall propose to sell, grant a
security interest in, or otherwise transfer any interest in student loans to any
prospective purchaser, lender or other transferee, the Servicer shall give to
such prospective purchaser, lender or other transferee computer tapes, records
or printouts (including any restored from backup archives) that, if they shall
refer in any manner whatsoever to any Financed Student Loan, shall indicate
clearly that such Financed Student Loan has been sold and is owned by the
Eligible Lender Trustee on behalf of the Issuer and has been pledged to the
Indenture Trustee.
(f) The Servicer shall permit the Indenture Trustee and the
Swap Counterparty and their respective agents at any time during normal business
hours to inspect, audit and make copies of and abstracts from the Servicer's
records regarding any Financed Student Loan;
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provided, however, that the Servicer is given reasonable prior notice of at
least three (3) Business Days.
(g) Upon request, at any time the Eligible Lender Trustee or
the Indenture Trustee shall have reasonable grounds to believe that such request
would be necessary in connection with its performance of its duties under the
Basic Documents, the Servicer shall furnish to the Eligible Lender Trustee or
the Indenture Trustee (in each case, with a copy to the Administrator), within
five (5) Business Days, a list of all Financed Student Loans (by borrower social
security number, type of loan and date of issuance) then held as part of the
Trust, and shall cause the Administrator to furnish to the Eligible Lender
Trustee or to the Indenture Trustee, within 20 Business Days thereafter, a
comparison of such list to the list of Initial Financed Student Loans set forth
in Schedule A to the Loan Sale Agreement as of the Closing Date, and, for each
Financed Student Loan that has been added to or removed from the pool of loans
held by the Eligible Lender Trustee on behalf of the Issuer, information as to
the date as of which and circumstances under which each such Financed Student
Loan was so added or removed.
SECTION 7.03. Notices. Unless otherwise agreed by the
recipient, all demands, notices and communications upon or to the Seller, NBD,
the Servicer, the Eligible Lender Trustee, the Indenture Trustee, the
Administrator, the Rating Agencies or the Swap Counterparty under this Agreement
shall be in writing, personally delivered or mailed by certified mail, return
receipt requested (or in the form of telex or facsimile notice, followed by
written notice delivered as aforesaid or postage prepaid, first class mail), and
shall be deemed to have been duly given upon receipt;
(a) in the case of the Seller, to
USA Group Secondary Market Services, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attention: President and Chief Executive Officer
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Office of the General Counsel
USA Group, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000;
(b) in the case of NBD, to
NBD Bank, N.A., as
trustee for USA Group
Secondary Market Services, Inc.
-00-
Xxx Xxxxxxx Xxxxxx
Mail Code XX0-0000
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000;
(c) in the case of the Servicer, to
USA Group Loan Services, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attention: President
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Office of the Deputy General Counsel
USA Group, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000;
(d) in the case of the Issuer, to
Student Loan Trust 1999-B
c/o First Chicago Delaware, Inc.
FCC National Bank
000 Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000,
with a copy to the Eligible Lender Trustee
at the Corporate Trust Office of the
Eligible Lender Trustee;
(e) in the case of the Eligible Lender Trustee, at the
Corporate Trust Office of the Eligible Lender
Trustee;
(f) in the case of the Indenture Trustee, at its
Corporate Trust Office;
(g) in the case of the Administrator, to
USA Group Secondary Market Services, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attention: President and Chief Executive Officer
Telephone: (000) 000-0000
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Telecopy: (000) 000-0000
with a copy to:
Office of the General Counsel
USA Group, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000;
(h) in the case of Moody's, to
Xxxxx'x Investors Service, Inc.
00 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: ABS Monitoring Department
Telephone: (000) 000-0000
Facsimile: (000) 000-0000;
(i) in the case of Fitch, to
Fitch IBCA, Inc.
Xxx Xxxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Asset Backed Monitoring Unit
Telephone: (000) 000-0000
Facsimile: (000) 000-0000; and
(j) in the case of the Swap Counterparty, to
Xxxxxxx Xxxxx Derivative Products AG
Xxxxxxxxxxxxxxxxxx 0, 0xx Xxxxx
0000 Xxxxxx
Xxxxxxxxxxx
Attention: Manager
Telephone: 000 000 000 0000
Facsimile: 011 000 000 0000
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with a copy to:
Xxxxxxx Xxxxx & Co.
Office of General Counsel
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000;
or, as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 7.04. Assignment. Notwithstanding anything to the
contrary contained herein, except as provided in the succeeding sentence, as
provided in Section 5.03 and as provided in the provisions of this Agreement
concerning the resignation of the Servicer, this Agreement may not be assigned
by the Servicer. This Agreement may only be assigned by the Eligible Lender
Trustee to its permitted successor pursuant to the Trust Agreement.
SECTION 7.05. Limitations on Rights of Others. The provisions
of this Agreement are solely for the benefit of the Servicer, the Issuer and the
Eligible Lender Trustee and for the benefit of the Administrator, the Indenture
Trustee and the Noteholders, as third party beneficiaries, and nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Trust Estate or
under or in respect of this Agreement or any covenants, conditions or provisions
contained herein. The Indenture Trustee and the Swap Counterparty are express
third-party beneficiaries and may enforce the provisions of this Agreement as if
they were parties hereto; provided, however, that in the case of the Swap
Counterparty, such right to enforcement and the right to provide consents or
waivers pursuant to the provisions hereof or to take other actions as provided
herein are conditioned upon its not being in default under the Swap Agreement.
SECTION 7.06. Severability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 7.07. Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 7.08. Headings. The headings of the various
Articles and Sections herein are for convenience of reference only and shall
not define or limit any of the terms or provisions hereof.
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SECTION 7.09. Governing Law. This Agreement shall be construed
in accordance with the laws of the State of Indiana, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 7.10. Non-Petition Covenants. Notwithstanding any
prior termination of this Agreement, the Servicer shall not, prior to the date
which is one year and one day after the termination of this Agreement with
respect to the Issuer or the Company, acquiesce, petition or otherwise invoke or
cause the Issuer or the Company to invoke the process of any court or government
authority for the purpose of commencing or sustaining a case against the Issuer
or the Company under any federal or state bankruptcy, insolvency or similar law
or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator
or other similar official of the Issuer or any substantial part of its property,
or ordering the winding up or liquidation of the affairs of the Issuer.
SECTION 7.11. Limitation of Liability of Eligible Lender
Trustee and Indenture Trustee. (a) Reserved.
(b) Notwithstanding anything contained herein to the contrary
(other than pursuant to subsection (d)), this Agreement has been signed by The
First National Bank of Chicago not in its individual capacity but solely in its
capacity as Eligible Lender Trustee of the Issuer and in no event shall The
First National Bank of Chicago in its individual capacity or, except as
expressly provided in the Trust Agreement, as beneficial owner of the Issuer
have any liability for the representations, warranties, covenants, agreements or
other obligations of the Issuer hereunder or in any of the certificates, notices
or agreements delivered pursuant hereto as to all or which recourse shall be had
solely to the assets of the Issuer.
(c) Notwithstanding anything contained herein to the contrary
(other than pursuant to subsection (d)), this Agreement has been accepted by
HSBC Bank USA not in its individual capacity but solely as Indenture Trustee and
in no event shall HSBC Bank USA have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto,
as to all of which recourse shall be had solely to the assets of the Issuer.
(d) Notwithstanding any other provision in this Agreement or
the other Basic Documents, nothing in this Agreement or the other Basic
Documents shall be construed to limit the legal responsibility of the Eligible
Lender Trustee or the Indenture Trustee, to the U.S. Secretary of Education or a
Guarantor for any violations of statutory or regulatory requirements that may
occur with respect to loans held by the Eligible Lender Trustee or the Indenture
Trustee pursuant to, or to otherwise comply with their obligations under, the
Higher Education Act or implementing regulations.
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[Signatures Follow on Next Page]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
SMS STUDENT LOAN TRUST 1999-B,
By: THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but
solely as Eligible Lender Trustee on
behalf of the Trust
By: _______________________________
Name:
Title:
USA GROUP LOAN SERVICES, INC.
By: _______________________________
Name:
Title:
USA GROUP SECONDARY MARKET SERVICES, INC.
By: _______________________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO, not in
its individual capacity but
solely as Eligible Lender Trustee
By: __________________________
Name:
Title:
Acknowledged and accepted
as of the day and year first
above written:
HSBC BANK USA, not in
its individual capacity but
solely as Indenture Trustee
By: _________________________________
Name:
Title:
SCHEDULE A
The Servicer shall maintain each Student Loan File at one of the locations
listed below:
(a) USA Group Loan Services, Inc.
00000 XXX Xxxxxxx
Xxxxxxx, XX 00000
(b) USA Group Loan Services, Inc.
Brambles DVS, Inc. d/b/a Indianapolis Vault Company
0000 Xxxx 00xx Xxxxxx
Xxxxxxxxxxxx, XX 00000
